I had an interesting discussion yesterday with a first-time home buyer. He was interested in a condo in Santee but was concerned about the price being too high. I researched comparable sold and active property listings for him and determined that the pricing was bang on. The listing agent and seller had priced the property perfectly given all the variables of location, age, amenities, size, etc.
My buyer did not like that response and went on to describe for me everything that he felt detracted from the value of the property. After he ranted for a few minutes I told him, “All of that doesn’t matter.” “What do you mean?” he asked. “Value is measured by what the market will bear; what buyers are willing to pay for a specific property on any particular day,” I replied. “This week $460K is a very fair price for that condo. A month from now it might only be $410K. A year ago, it would have been over $500K.”
No wonder the market seems to be in limbo. Both buyers and sellers are confused about where prices are headed and changing interest rates only add to the confusion.
A new study from the UCSD Rady School of Management predicts that prices will drop by 12% in San Diego County by the end of 2023. Values have already declined by 2.5% which means that a home that sold for $1.2 million in May, 2022 might sell for $1,170,000 today and $1,029,000 by the end of the year. According to the study, San Diego will experience a greater price drop than the national predicted average decrease of 5% due to the greater price escalation as the pandemic wore down. People embraced the idea of working from home and San Diego with all of its sunshine and suburbs was the perfect location. Desirability combined with scarcity and historically low interest rates drove our home prices through the roof.
The Rady study does not necessarily have consensus support in the industry, but just based on what I’m seeing in the past 6 weeks, I’m inclined to agree. However, just to clarify, they are not predicting a housing crash like 2007/2008 but more of a price correction. That being said, I think the price declines are happening even more quickly than they predicted.
So, is this a good time to buy or sell? Should sellers get their home listed before prices fall even further? Should buyers wait for prices to drop? IMHO, homeowners thinking of selling would be well advised to list now as I only see price decreases in the near future. For buyers, well, waiting can be a fool’s game as there are no market guarantees. Interest rates have moved down slightly so If you find a property that fits your needs and you can afford it, go for it! Keep in mind that a financed price difference of $10K is only $67 a month, even at 7.0%.
Want to talk it over? Just give me a call and we can explore your best options.
Graphic courtesy of Velocity Title Company